NRI’s Guide On How To Deal With Gifted Property

For years now, NRIs have been opting to own a property in India. They are always on the lookout for buying residential property in India because they know that they have to eventually return to India. Some NRIs receive a property in India as a gift or inherit it from their parents/relatives in India. However, there are a set of rules and regulations an NRI should comply with if he has acquired a property as gift in India. An NRI should remember that the tax and regulatory implications for a gifted property are different from those for an inherited property.

Can an NRI be gifted with a property in India? What are the property types?

As per Section 122 of the Transfer of Property Act, 1822- ‘the transfer of a certain existing immovable property made voluntarily and without consideration, by one person called the “donor”, to another, called the “donee” and accepted by and on behalf of the donee’ is justified as property gifting. An NRI/PIO can acquire a property in India by way of gift from either a resident Indian or another NRI/PIO. Nevertheless, the NRI can acquire only a commercial or a residential property and not a plantation land, an agricultural land or a farm house. Similarly, a foreign national also cannot acquire a property by way of gift in India.

Will an NRI be liable to pay tax on the gifted property in India?

Whether or not an NRI will be liable to pay tax on gifted property will depend on a couple of factors. If an NRI receives a property, worth Rs.30 lakh or less, as a gift from his family, relatives, spouse or siblings, he will not have to pay tax. This rule also applies if an NRI has been gifted with a property from any lineal ascendant or descendant. The gifted property will also be exempted from tax if it is received on the occasion of marriage or from a registered trust. On the other hand, a gifted property that is valued more than Rs. 50,000 and is gifted by non-relatives will be taxed under the income of the person receiving the gift. Therefore, the receiver should add the fair market value of the received gift to his total income and calculate his tax.

On the other hand, as per the Wealth Tax Act, the property will be subject to wealth tax if the net value (consisting of the market value minus the loan sought to buy the property) of the person’s assets is more than 30 lakh. The term ‘assets’ in such a situation will be seen in a different aspect:

In case of a single property :If an NRI possesses just one residential property in India, he will not be entitled to pay wealth tax. However, if the NRI owns more than one property in India, he will be entitled to pay wealth tax on the value of his assets exceeding Rs. 30 Lakh.

In case if the property is rented out for more than 300 days:If the NRI has rented out his property for more than 300 days in a financial year, he will be exempted from wealth tax. Although he will be liable to pay income tax on the rental income earned.

Provisions for clubbing of incomeEven in case of gifted property, clubbing provisions similar to income tax apply and need to be evaluated in case of gift to spouse and/or son’s wife. In such a case, property would continue to belong to the donor for the purpose of wealth tax applicability. This means if an Indian gifts his property in India to his wife or his son’s wife staying in another country, the rent generated from the gifted property will eventually be added to the total income of the person giving the gift.

What are the repatriation rules and tax implications for the sale of a gifted property?

When an NRI sells away his gifted property in India, he should credit the sale proceeds to an NRO account only. However, the NRI can remit up to USD 1 million from the balance in the NRO account each year, subject to the satisfaction of authorized dealers and the payment of the applicable taxes.

The tax implications on the sale of property received as gift are the same as those in case of sale of purchased property. In this case though, the purchase price for calculation of capital gains will be the purchase price paid by the person who gifted the property and the holding period for determining if the gains are long term or short term will be computed from the date of purchase by the person who gifted the property.

Can an NRI gift property?

Yes, an NRI/PIO can gift a property in India to a resident Indian or another NRI/PIO. But agricultural land, plantation land and a farm house can be gifted only to a resident Indian and not another NRI/PIO.

11 thoughts on “NRI’s Guide On How To Deal With Gifted Property”

My father has inherited 1/4th share of property from his father ( my grandfather)
he wants to gift it to me. He resides in Hyderabad India.
I am an NRI in UK. but still Indian National, with Indian citizenship and passport.

Please can anyone tell me the tax implications – for me as a Donee

Secondly, Implications for repatriation.

Please note I do have another property in India that acquired myself.,

Your father can gift his share to you, an Indian NRI without any issue.

There are no tax implications for gifting other than the stamp duty applicable for registering the transaction.

When you sell it, the sale proceeds will attract capital gains which will have to be computed after adjustment for inflation as per index. Holding the property for a minimum period of 24 months is recommended so that it does not attract short term capital gains tax (higher rate). If you sell after that period, then only long term capital gains tax shall apply (lower rate) and on payment of such taxes and with a due certificate from the chartered accountant, the bank will process your repatriation request. An amount of Rs.1 million USD is permissible for repatriation per year subject to other conditions being fulfilled.

My husband and myself jointly own a house property in chennai. We have one son who is NRI not married and one daughter with 2 kids. We would like to give the property to my son. Which is better a will orsettlemen deed. Which is easier for my son to transfer since he is an NRI. He will not be having much time to follow the formalities. Your replies to queries are very clear. Moreover I would like to know what is NRI account. I hope it is an ordinary SB account with Indian residential address. Please. Clarify. Thank you

Hi Kousalya
The best way to deal is with a Gift Deed (where the presence of both parties is needed but it avoids future complications on the legal heirship issues). However, with a registered Will it can be completed (where physical presence of your son is not needed) but after demise of original owners, the same Will need to be probated in court (to rule out any further Will being made or any legal heirship issues).

Regarding NRI account, it is an Account opened by Non Resident indians (NRIs) to operate their money in India (which they may earn from different other income sources like Stocks, Mutual Funds, property etc). Valid residential proofs on foreign address is needed and have certain regulations to follow to repatriate the fund from India to abroad in future.

For gifting a property to my NRI son. please advise as follows-\r\n1. Can the property be gifted without travel to India through certain documents with Indian Consulate and Legal Affidavits?\r\nIf so, what are the documents needed and do you or your affiliates offer such services, please respond with applicable fees and time duration?\r\n2. If point 1 is not possible, what documents I need to carry to India and if both my and son’s presence is needed in India while gifting or I could handle alone myself with certain documents from Indian consulate.\r\n3. What are the detailed stages/steps/ documents/forms in completing the gift and the concerned authorities? Is it necessary to hire some expert agent services to do it expeditiously?\r\n4. How much time does it take normally if done through an service provider or self-served?\r\n5. How much will be the stamp duty for registration and other expenses etc?\r\nThanks

Hi Chander,\nWe believe the property is in Bangalore and based on that information is given. If not, then the required details to be checked accordingly to State specific process.\n1) There is legally no way to gift the property without parties being physically present in India. The Gift deed need to be registered and hence this is required.\n2) For doing Gift deed, you need to bring the present Sale deed, latest Tax paid receipt & Khata and the drafted Gift Deed. Based on that & in presence of both parties (you & your son), the Gift deed registration can happen. At times, with PoA this can be done (avoiding one party being physically present). The PoA should be given by your Son to close blood relative (signed at stamped by Indian Consulate and further adjudicated in Registrar office) and based on that the PoA, you can do the gift deed registration. Advisable that you should not be the PoA holder rather some other relative (your wife/your any other son/daughter) to avoid any future complication.\n3) If you are not aware of the process, its better to hire any agency or a competent legal person to assist you to process the details faster.\n4) Review of the documents is the key, if that is given, a defined timeline can be provided. On experience, registration takes only one day but other associated checks & preparation of deed draft consumes time.\n5) Stamp duty & registration charges will be approximately Rs. 2000/-. Any other charges to be checked before going for registration and can be provided, once we do have the detailed documentation.\nIf you need any assistance, you can let us know at services@homeshikari.com or call us at +91-80-67684444 (we work 9 am to 6 pm, Monday to Friday).

Your reply to question from Ajit covers all but one aspect. What if the brother in India (who received gift from NRI brother and it was registered as required) decides to sell the property in India within a few months of receiving the gift, I would like to ask the followings:\r\n1. Is there any time restriction within which the brother in India can sell the property received as gift?\r\n2. How will the gain or loss be calculated in the hands of the brother in India?\r\n3. Will it treated as capital gain or ordinary income? \r\nThanks.

Hi pravir\n\n1) There is no time restriction on selling once the property is received as a gift.\n2) The tax implications on the sale of property received as gift are the same as those in case of sale of purchased property. In this case though, the purchase price for calculation of capital gains will be the purchase price paid by the person who gifted the property and the holding period for determining if the gains are long term or short term will be computed from the date of purchase by the person who gifted the property. i.e, the capital gains will be computed on the basis of the purchase price of your brother and the selling price at which you are selling the property, indexed over the entire hold period.\n3) Capital gain, not ordinary income

Hello,\r\n\r\nThank you for wonderful webpage and associated information.\r\n\r\nI would be keen to know the regulations around the Gifting of property (apartment) in India by an NRI to his brother (resident Indian). From your webpage I understand that it is possible to do so. \r\n\r\nCan you please tell me \r\n1) Is there any stamp duty to be paid in the process of gifting?\r\n2) if there are any further selling restrictions on the recepient (brother) in the future with such a property as he obtains it as gift from NRI. Also are the normal Short term and long term capital gains tax rules applicable in such case when he sells out in due course of time?

Hi Ajit,\r\nHappy to note that you appreciate the quality of information we put up for the benefit of our users.\r\n\r\nTo answer your queries regarding gifting:\r\n\r\nAn apartment can be gifted by an NRI to his brother, a resident Indian without any restrictions. Brother is presumed to be one’s own brother, in this case.\r\n\r\n1) Yes, there will be stamp duty to be paid for registering the gift deed. Stamp duty is a state subject and hence the percentage applicable on gifting varies (2%-8%) from state to state. You can either tell us the location of this apartment or you can check the respective state’s IGR (Inspector General of Registration and Controller of Stamps) website for more info.\r\n\r\n2) There are no restrictions on the recipient in terms of selling, renting or enjoying the property in a peaceful manner, anytime in the future. The fact that it is a gift from the NRI brother does not change your rights in any manner. A registered gift deed is irrevocable and the person giving the gift cannot reverse the transfer or ask for monetary compensation later. However, any deed or transfer of title that happens through coercion, fraud or misrepresentation can always be challenged. This equally applies to even a sale deed, not just the gift deed. Not that it is going to happen, but we are just appraising you of all dimensions to the gifting process.\r\n\r\n3) Yes, normal short term and long term capital gains / loss are applicable when you sell such a property in due course of time. However, there will be no income tax implication due to receiving the gift at this juncture because the ‘brother’ relationship falls under the definition of relative as per the Act. There are no tax implications for your NRI brother because he is not receiving any consideration in this transaction.\r\n\r\nRemember that in any legal transfer of title, it is important to ensure proper legal checking and drafting in order to ensure peaceful enjoyment and to avoid future pitfalls for both parties, even though both are blood relatives. So ensure that you consult a good lawyer at the time of doing this transaction. Of course, you can always check with our HomeShikari empaneled lawyers as well. Good luck.\r\n\r\nYou can also read more on property transfers in this article – http://articles.economictimes.indiatimes.com/2013-08-12/news/41332727_1_gift-immovable-property-transfer-agent-gift-deed